Housing’s Double Dip: Is the Government to Blame?
The S&P Case-Shiller home cost data for the initial quarter of 2011 are so dreadful that nearly every person agrees that the U.S. housing market is in the midst of a “double dip.” Curiously absent from several of these analyses is the role played by the federal government in helping to engineer a double-dip with its ill-devised homebuyer tax credit. Originally aimed only at initial-time homebuyers and set to expire at the end of November 2009, the tax credit was later extended through the end of June 2010 and expanded to all homebuyers below particular income levels. The extension and expansion was attributed to the early “success” of the program, evidence for which consisted of absolutely nothing much more than households’ willingness to accept totally free income from the government.
As explained here, the home buyer tax credit in no way produced any sense in the initial location. For every house buyer motivated to make a buy by the credit, there are numerous much more that would have created the buy anyway. For this second category of house buyers, the tax credit is pure windfall. For the initial category, the accurate marginal sales produced feasible by the credit are likely to be far fewer than those who likely would have bought a property in the near future but decided to expedite the purchase method to capitalize on the credit. So even among the population who wouldn’t have otherwise purchased a residence during the tax credit’s eligibility period, a big portion most likely would have ended up purchasing later in 2010 or these days.
 
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